Skip to main content

Review investment if your fund is below peers consistently

 

Absolute returns may mislead as it captures point-to-point returns LOOK at different periods. If the performance is still bad, look at peer

DEPENDING on market conditions, new fund offers (NFOs) and existing schemes of mutual funds will throw up varied returns. As an investor, worst fears come true when your fund shows below-par returns or negative returns.

Should an investor react to point-to-point returns or should he/she wait to see regular performance to spot the dud fund?


Experts advise that there is no `magical' way to decide whether a fund is a lemon but ask investors to use different parameters to adjudge its success or failure.


Absolute figures may mislead: If your mid-cap fund is down 12 per cent in a one-year horizon that does not mean that the fund manager is fleecing you.


Comparing absolute returns may be misleading because they capture point to-point returns. The first step is to look at relevant index or benchmark, such as BSE Midcap.

But then, if the fund shows underperformance, don't give up fully on it.


Look at different periods: If the performance is still bad, look at peer performance. It may well be that the markets were soft during a single period due to which the fund's absolute performance for say 12 months looks poor. As an investor, if you see that the fund does not have sufficient historical data, you have two choices -stay or exit. Stay put or exit immediately? That is a timeless question. Research and different studies point out that investors attach emotion to their investments, even if it is a mutual fund. As a thumb rule, if your money in an NFO does not increase in three years, it could be time to review the investment.

You have to admit it was a bad investment for you as you could not make money. Take a hit and then take a fresh call

Admittedly, certain categories of funds like thematic funds or sector funds are riskier bets than a plain vanilla diversified fund that has no bias towards a particular sector or theme.
The possibility of disappointment is higher in the thematic/sector funds, experts pointed out.


Other factors: Due to fund manager change or takeover by another fund management company, investors should pay more attention. If the sole reason for your investing in a fund was due to star manager who has quit, any below-par performance in the fund would make an investor anxious.

It is very rare that a fund or a category of funds continue to perform badly over long stretches of time.
Do not take decisions based on six-month time periods.
One thing should be clear.
A mutual fund manager has to be given time to perform. But if he/she still can't, then investors have every reason to be angry
 

Popular posts from this blog

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...
Read more

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...
Read more

Birla Sun Life MIP II Savings 5

  Birla Sun Life MIP II Savings 5 - Invest Online   Have you traditionally been a debt investor but now wish to test waters in equities? Then, debt-oriented funds such as Birla Sun Life MIP II Savings 5 (Birla Savings 5), which have limited exposure to equities, may fit your requirement. With a five year return of 10.5 per cent compounded annually, the fund managed a good 3-3.5 percentage points more than its benchmark Crisil MIP Blended Index, as well as its category average. The fund appears well poised to capitalise on a falling interest rate scenario and has increased the average portfolio duration of its debt instruments in recent times. Suitability Birla Savings 5 is suitable only for conservative investors. If you want to make a beginning in equities and cannot take any short-term declines in your stride, then this fund will suit you. If you are already an equity investor and want to use a debt-oriented fund merely as a diversifier, then you may prefer peers from the HDFC and Re...
Read more

Why credit history is critical?

Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing...
Read more

Stock Market Concepts: Derivatives and taxation

DERIVATIVES refer to an instrument, which derives its value from the value of something else — that is, an underlying asset. In India, the derivatives space has traditionally been the playground for large institutional investors who use it for hedging or for speculative activities. However, with time, we have seen a steep augmentation in the per capita income of an average Indian. Consequently, the appetite for investment in alternative instruments has transcended into the need to explore untested territories, and one of the most lucrative of all the available options, is the derivatives. Taxation Of Derivatives: Let's have a sharp overview of how taxability impacts the dealings in futures and options: Futures: Since, there is no transfer or delivery of the underlying asset in case of futures, the income or loss from it cannot be taxed under the head "capital gains". Therefore, depending upon the fact whether the assessee is a trader or an investor, the head of income...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now